Adoption of a new solution, product or service – the ‘psychology’ behind !

What led to the purchase of my second smart phone? Funnily, the question reared its ugly head only after I received the bank’s text reminder on my older phone that the expense has been credited to my already dwindling credit card. What was the rationale behind the buy? Should I blame it on my unenviable track-record of binge buying or was there a genuine (unidentified) need?

It’s never been easy to unearth the reason why a logical being would stray from rational economic behaviour. It’s been even more difficult to fathom how an individual’s values influence his choices in the in a given marketplace or under what circumstances an individual or an organization would like to be introduced to a new paradigm, product or service.

Typically, social scientists have drawn our attention to four distinct behavioural aspects that influence such adoptions or even considerations:

• Worth: Buyers tend to attach ‘perceived’ value to the alternatives available, rather than the subjective ones, fundamentally associated with the products or services.

• Frame of reference: Most buyers invariably resort to benchmarking a new offering against the existing alternatives (no wonder the buying decision becomes such a critical one when a new product is genuinely an ‘original’ concept with little or no comparable offerings. Uniqueness may not always be a ‘virtue’, after all!).

• Valuation: More often than not these referential evaluations boil down to a discrete ‘gain-loss’ comparison.

• The clincher: It has been found more often than not that the perceived notion of ‘potential losses’ leave far greater impact on consumers’ buying decisions than ‘probable gains’ out of adopting a new alternative.

The above-mentioned aspects merely cement the hypothesis well-established in behavioural economics known as the ‘Endowment Effect’ which says that people essentially assign greater value to things they own vis-à-vis the ones they don’t. Endowment effect in its very definition states that it becomes functional whenever the quantum of consumer’s ‘minimum acceptable benefits’ exceeds the ‘cost of acquisition’ that the consumer is willing to part with.  Such decisions are almost always influenced by, in addition to other cognitive considerations, a bias for status quo in a tight coupling with risk aversion.

Some economists assign a value three times greater to people’s regard for what they already have as compared to their perceived value of a new product they intend to invest in. So it’s a no-brainer that to get a prospective customer to buy into a fresh idea, the new product has to establish ‘perceptual’ benefits, many-a-times, over existing alternatives.

In some cases the ‘perceived’ improvements, it has been found, is just one of the many factors influencing the decision. Precise messaging, appropriate conveyance of the ‘value’ of the new product and veracious and credible ‘influencers’ are some of the strongest levers. Early identification of fans of the new concept go a long way in creating and leveraging convinced champions of the cause, in adoption of a new technology, product or service. Understanding and appreciation of the ‘need’ and the ‘behavioural pattern’ of the prospective users is no less important than ‘innovation’ itself, when it comes to predicting or even strategizing the success of the new product. 

Well, I am still trying to solve my own case of identifying the psychology behind burning some well-preserved cash in acquiring a fresh piece of the glitzy gadget. Till the time I manage to figure it out, I have decided to refrain from investing in another new smart device or even another ‘trending’ piece of OS or pricey app, at the least.

India's National Food IN-Security

The country’s GDP is reeling under the pressure of Eurozone and global economic turbulence, the Indian currency is rapidly loosing its sheen, the markets throbbing with negative anticipation and each of the centre’s political allies relentlessly pushing for their pound of flesh! Did Pranab Babu, the Brahmin from Kirnahar and the perpetual second-in-command in successive Congress governments, have a choice but to declare austerity measures and a slow withdrawal of fuel subsidies? Apparently none. But why then the Government, didn’t press the button a little earlier by controlling the expenses on the lame duck President’s insipid foreign visits? Why then the state is contemplating building a 4,500 square feet sprawling bunglow, in Pune Cantonment area, for the President’s post retirement stay, wasting a few more precious crores? This at a time when the State has failed miserably in its duty to ensure food and nutrition for poorest of the poor of this country.

The article 47 of the Indian constitution says, “The State shall regard the raising of the level of nutrition and the standard of living of its people and the improvement of public health as among its primary duties”. Even the Supreme Court has linked citizens’ right to food to their fundamental rights, hearing PILs and delivering judgements and observations in atleast 65 cases, since 2011, related to hunger, malnutrition, food and social insecurity, etc. But does anyone believe that the Government has paid any heed to the Apex court’s call for accountability and action?

Innumerable Indians die of starvation and malnutrition. The numbers are appalling and scary. The Great Indian Food Paradox is that every year millions of tonnes of food grains are left to rot and are scandalously wasted, in absence of adequate and proper storage space and competent supply chain strategies. Ceaselessly kept on its toe by its political allies the Government continues to be burdened with the weight of the great Indian populist politics, and is obliged to be the largest single buyer of the gross national agricultural produce, in the name of a systemically flawed concept called ‘national food security’ – a misnomer in a country where well over 30% of the population are reeling under intense poverty and are struggling to secure one measly square meal a day.

The Government hardly has an alternative when it comes to buying the agricultural produce to try and protect the farmers from resorting to distress sale of food grains in case of bumper crops. Smarting under the compulsions of coalition politics, the UPA Government keeps on pleasing agricultural lobbies by ensuring basic minimum price of purchase, completely regardless of the demand-supply theory as well as the health of its very own coffer. Every lawmaker in the parliament sings to the same tune and never questions the populist yet chronically inefficient method of the Central food procurement policy.

The fact remains unchanged and is in the public domain, that incredible amounts of food grains are wasted year after year, due to the sheer incompetence of the successive Governments in providing adequate storage or establishing a properly functioning supply chain. Neither the Babus nor the Netas are willing to question the terribly flawed system, resulting in colossal wastage of accumulated stocks, left to rot under the vagaries of merciless weather conditions in open and unprotected spaces. The saddest dilemma is that if the Government sanctions funds for building up a chain of state-owned godowns, its treasury would fall short of the money required to purchase food grains from the farmers, to hoard up the godowns built on public money in the first place. What a damning irony at hand!

Another pertinent question is then why doesn’t the Government just use up the surplus crops and distribute them at subsidised rates through public distribution system? The answer is simple: transportation costs, system inefficiencies, leakages, pilferages, theft and manipulation by local officials and dealers would jack up the cost of distribution quite a few notches above the cost of storing them in open spaces.

So would it help bringing in supply chain specialists, who have the knowledge, experience, moolah and intention with no compulsion other than that of practicality, economy and commerce? Would our quintessential political class, raise themselves above serving their petty political interests, by grabbing onto an opportunity to show that they care? Or would FDI in Retail continue to be the favourite whipping boy for the legislators, especially the ones who are happy to keep a seriously starved nation hanging on its hinges, and sacrificing pure economic logic and larger good on the altar of dumb regional politics?!

 

Pic courtesy: various news sources     

Who needs constitutional puppets anyway?

The current Indian President’s foreign visits spanning over the last half-a-decade have driven an incredibly large hole, deep into the pockets of the national exchequer, funded by the struggling taxpayers.  Her ‘official’ wanderlust, along with her kin, has made the country poorer by a whopping 205 crore, breaking all records with aplomb. The president’s itchy feet achieved the nearly impossible feat, while millions of Indians are left smarting under intense poverty, crippling inflation, endless corruption and dumb Indian politics.

The President, while talking to leading Indian news channels recently, justified her foreign trips claiming that her visits ‘go a long way in boosting India’s image internationally’! She described her 20 plus foreign trips to be ‘very successful’ in promoting India's growing image abroad and strengthen the country's ties with those nations. Beat that!

 ... is this the great Nehruvian socialist dream we all dreamt of?

From as much as I have followed the ‘ghoongta’ flaunting, coy demeanored lady during her tenure, with little or no demonstrated ‘aura’-tory or oratory skills, I am at my wits end to understand how her visits would ‘enhance’ the image of a modern, rising, new India to the rest of the world! Titular constitutional heads like the President or the Governors, in their current avatars, hardly have any influence on the Indian socio-economic or foreign policies. Some of them even get chosen based on their political affiliation that betrays their personal merit or caliber for the post. After more than half century of trials and tribulations of independent India, do we still need to continue with these useless constitutional posts and continue to drain tax payer money, those could well be used to alleviate deeper socio-economic problems like national ‘food security’?